Adobe plunged almost 17%, value buy or trap?

Adobe ( $Adobe(ADBE)$ ) plunged almost 17% on Thursday when it reported its earnings. This was in addition to the market's reaction on its $20 billion deal on acquiring Figma, a collaborative design platform developer, in a half cash, half stock in which Figma's employees would receive 6 million additional Adobe restricted stock units that will vest over four years from closure of the deal.

Adobe expects Figma to add to the company's earnings by the third year of the after the deal's completion, and it suggests that Adobe's earnings would see a negative impact for two years.

Additionally, Adobe guided their fourth quarterfiscal 2022 revenue to $4.52 billion and EPS of $3.50 per share, while analysts had expected$4.6 billion and $3.47 EPS.


In terms of earnings estimates from analysts, they expect Adobe to continue to grow its revenue in the low teens six to eight quarters.

Adobe consensus revenue estima (Source: Seeking Alpha)

What the chart says

ADBE Weekly

ADBE during March 2020

The stock had plunged so much that we have to go to the weekly chart to find the levels of support. Looking at the chart, the current price sits around levels back in March 2020 during the covid 19 plunge. The likely support areasare around $290, although anything south of $275 could mean more pain. 

Ratios and Valuation

Adobe's current price to earnings GAAP (TTM)is now at a 3 year low of 30, while price to sales is at 8.78. 

Adobe price to earnings (Source: Seeking Alpha)

Adobe's price to sales (Source: Seeking Alpha)

In terms of its intrinsic value, Morningstar rates Adobe as a 5-star with fair value at $500. That is a significant discount of 38% with hugemargin of safety, and Adobe has a wide economic moat, with medium uncertainty of hitting its fair value target.

Given the attractive ratios and discount from its fair value, Adobe looks attractive at its price after the plunge. However, if you are lookingfor a bigger margin of safety, anything less than $290 will be very attractive. Investors might also wait after the next Federal Open MarketCommittee meeting on September 20-21 before committing capital in this stock. 


@TigerStars  @CaptainTiger 

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  • boardy
    ·09-24 05:52

    Great article I would like to share 

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  • Why why
    ·09-20
    it's a trap
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  • GerryLoh
    ·09-19
    good sharing thanks
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  • Creatot
    ·09-19
    Reply
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  • aunteenat
    ·09-19

    Interesting 

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  • yapkokpeng
    ·09-18
    谢谢分享
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  • My designer friends all commented they can never work without Adobe.
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  • sbikeken
    ·09-18
    從來都沒有看過那麼厲害的PO文!
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  • boardy
    ·09-18

    Great article I would like to share 

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  • ThaiGirl
    ·09-18
    Drop n drop.  Bye bye
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  • WingCheong
    ·09-18
    In my humble opinion, not a good time to buy this stock.
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  • TANG413
    ·09-18
    okayggg [Tongue]
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  • Alvinkctan
    ·09-18
    Noted with thanks.
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  • jat
    ·09-18
    [Strong]i am waiting for Adobe to hit 290 as well! Missed the 291 on fri as i went to bed [Chuckle]
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  • lyKeoh
    ·09-18
    adobe free fall
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  • th0mastan
    ·09-18
    It will still be go-to software if you are a content creator, no doubt about it. The question is whether the share price will follow the follow suit
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  • Imkpy
    ·09-18
    Ok can try
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  • dallanube
    ·09-17
    still not bottom...
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  • charlito
    ·09-17
    lets go bei
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  • SJ嘉
    ·09-17
    Thanks for sharing!
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